Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

2nd Quarter | 2021

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

Gold prices consolidated last week, remaining above the 50-day moving average on the weekly chart and closing the week at $1,829.90 per ounce. The move up to a new high in August 2020 followed by the current regression forms a “pennant” formation when connected to the last sideways consolidation, which happened in the spring of last year (see the following chart).

Pennant formations generally precede a breakout in the direction of the previous trend, which in this case was bullish. The longer the extension of the pennant, the more powerful and sustained the breakout is expected to be.

Bullish gold fundamentals also look to continue. Precious metals dealer Sprott Money writes, “It looks like massive stimulus is finally upon us and the only question is how big it will be. The Biden team is considering up to $2 trillion in fiscal stimulus, far in excess of earlier estimates of $750 billion. … With massive fiscal and monetary stimulus to hit the U.S. this year and the need to cap bond yields, the biggest casualty is likely to be the dollar. This does not mean that the dollar can’t see significant short-term bounces, but the overall trend is likely to continue to be lower. Such a backdrop is only good for precious metals, especially if inflation expectations rise while nominal yields are capped. The resulting decline in real yields would also support higher Gold … prices.”

Rick Andrews is president of Avant Capital Management.



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